Burnt by the 2008/2009 economic and financial crisis, the Nigerian capital market which was ranked the third best global performer in 2017 has taken a hit from the double challenge of COVID-19 pandemic and lower oil price.
While the Nigerian Stock Exchange (NSE) reported a year-to-date return of -6.22 percent in the the first week of August, the growth of the fixed income and debt market is constrained by investors inability to access dollar, a challenge that poses risk to Nigeria’s economic recovery.
According to Bola Onadele.Koko, Chief Executive Officer, FMDQ Group, without a liquid FX market, other markets won’t work whether it is equities, derivative or even the repo market.
“If it is not easy for investors to bring their money in and take it out, Nigeria’s investors base will keep shrinking and the country will be deteriorating as its people will become poorer,” Onadele.Koko said.
For Africa’s largest economy to take its capital market to not just its days of glory but greater heights, it would have to adopt policy inclusiveness, leverage technology for the development of digital products and create investment awareness while also encouraging local investments, according to stakeholders in the capital market industry.
“Equity performance and investment in the capital market has been really low. There are less than 400 Collective Investment Scheme accounts for a country with over 200 million people. We need more campaigns to enlighten people on the importance of the capital market,” Lamido Yuguda, director general of SEC, said in a webinar on Wednesday.
Explaining how badly Nigeria’s economy has been hit by the outbreak of COVID-19, Onadele.Koko said the economy of Africa’s top crude producer is in ICU and cannot recover if it does not fix some fundamentals.
“FMDQ’s strategies for capital market recovery are grouped under three headings, namely: economic renaissance, market access and market transformation,” Onadele.Koko said, adding “a broader issuer base to include private capital and emphasised the provisions of incentives for corporate bonds issuance”.
During the webinar on ‘Strategies for the Recovery of the Capital Market (Post COVID-19)’ hosted by Susman and Associates, Oscar Onyema, CEO of the NSE, said there is need for policy inclusiveness at all government levels as well as adaptive innovation at the market level.
“Policy inclusiveness is to be worn on the back of a unified foreign exchange window converging at the I&E window as well as the creation of an enabling regulatory environment and also the expansion of the framework for public-private partnerships geared towards infrastructural development,” he said while commending the effort of the CBN towards the exchange rate unification.
In a bid to encourage and accelerate the fourth industrial revolution, the NSE recommends that there should be a development of digital product alternatives and technology should become a major part of a company’s workforce, as well as the development of digital skills.
NSE also recommends exploration of synergies within the ecosystem. Says its important and should be followed by leveraging the NSE’s demutualisation opportunities.
Infrastructural development and housing revolution were also highlighted by FMDQ as initiatives that can help to create a bigger capital market in Nigeria.
